Wanna buy shares in Tesla but don’t have the US$260 to buy just one share? Well, how about you buy half or a quarter? Let me explain.

I’m Kalilah Reynolds, financial journalist and educator based in Jamaica.

Did you know that for some stocks you don’t have to buy a whole share?

You can buy a fraction of a share.  It’s called a fractional share. Fractional shares allow you to invest in stocks based on a dollar amount, instead of total shares, so you may end up with a piece of a share, a whole share, or more than one. 

This practice is more common in larger markets, like the US, where the price for one share can get really high. 

Back in 2020, before the four-to-one stock split, Apple’s stock price was trading at almost US$400 per share. 

That’s US$400 for just one share. But if you didn’t have US$400, but you really wanted to invest in Apple, you could go ahead and buy US$200 worth of shares… you’ll just end up with half a share because you paid half the price.  That’s how it works.

Like I said this is great for stock with higher prices. It isn’t done in Jamaica because our stock prices are not that high. There’s no reason to buy half a share when the share is only two Jamaican dollars, for example. And even in the larger markets not every stock is available for fractional investing.

But as with everything, there are pros and cons.

Pro- more people can become shareholders in large companies.

Pro- you can start your investment journey with whatever money you have.

However, a big con is that fractional shares can be hard to sell on the open market. Because not as many people are going to want your half a share. They want a full one.

Most times fractional shares have to be sold through a big brokerage firm, which can join them with other fractional shares until they get a whole share. 

So, you may be stuck with a stock that you no longer want because it’s only a half or a quarter.

Another big con is the dividend payments. So yes, you will get a dividend payment because you technically are a shareholder. But the payout may be disappointing. Let’s say a company declares a 50 cents dividend. If you only have half of a share, you’ll receive 25 cents as a payout- before taxes.

So that’s also something to think about.

Also, when it comes to shareholders’ rights, depending on the broker, you might not have any. So you won’t get a chance to vote on issues. 

Of course that all changes if, over time, you buy enough fractions of the share to equal a whole one.

And that’s the bottom line.